AirBnB or FRBO - who out there is doing it or tried it?

[Bill Coleman]

I want to try using AirBnB or FRBO to rent living space to corporate customers at a rate lower than extended stay hotels and by providing an atmosphere closer to a real home. It would be completely furnished. Of course, consumers are welcome to rent as well. I don't really care who wants to pay my bills;)

Is anyone out there doing it?

Do you feel it is successful or not? Are you killing it or just getting by? Mistakes that you've made? Good decisions that you have made? What kind of a place are you renting out? Condo? SFH? Other?

Please provide as much detail as you feel comfortable sharing. We can also talk offline if that's better.

I really don't want to rent to families any more. I did that 20 years ago and ended up selling everything out of frustration.

[Account Closed]

@Bill Coleman

My vacation rental is what opened my eyes to the cash flow potential of real estate. We purchased our property with the idea of having someone else pay for our retirement home and provide us a place to stay when in town (we purchased a placed in Portland, OR). We got a wake up call when we were booked for two years within two months of listing the property on VRBO, Homeaway and other sites.

Now to answer your questions:

1) Due to pricing the rental too low to gain market share, we are break even, but will have no trouble making 8.6% Cash on Cash return on an initial 65K investment (20K was to furnish the house) and a 6.7% Cap Rate. So the numbers work, but are nothing better (and arguably worse) than any turn key you could find from some of the Pro's on this site.

2) Yes, I feel it is super successful, especially since it is in the Portland, OR market which has experienced huge appreciation and unless you purchase and reno, it is super hard to find a ready to go property that will cash flow. I also feel it is successful because I have been able to automate the process in a HUGE way and manage remotely very successfully. I actually believe their is a huge unmet need for 30 day furnished rentals in the area and am currently considering pulling equity from our home primary home in SF to purchase another property.

3) Mistakes I made - other than the pricing thing, no biggies. Sure, we purchased a keyless entry system that would fail randomly every 5 months or so, so we had to replace that with another model, but we though ahead and had a lockbox hidden within inches of the front door so no guest was ever waiting fro more than three minutes to gain entry. The other mistake was perhaps spending too much on furnishings. Unlike @Lynn Currie we were hoping to be able to stay there some times, so the thing is furnished super well. While I feel this has helped the place be booked solid, the 20K to furnish the house was a big chunk on top of the down payment and I think we could have saved 5K to 10K up front and not really impacted the "curb appeal".

4) Good decisions - Like @Lynn Currie buying it. The house was built in 2006, and we are the second owners and paid less than the original buyer. Within 12 months, the place has appreciated over 20%, so that is HUGE on top of it paying for itself. Secondly, I have not settled for "ok" support. My house cleaners are awesome and keep the house feeling new two years later. Along these lines, even my long term renters get a free house cleaning once a month, as it is a $135 insurance policy since my house cleaners let me know the condition of the house. Likewise, I have a great maintenance guy who treats the house likes his own and is not afraid to do a $100 repair without asking me when he is on site. Automation. I have a NEST Thermostat, so I can turn down the temperature remotely and even when my long term renters go away, the thermostat knows they are gone and turns down the temperature automatically. I use Lodgix to auto respond to leads and provide quotes and have a web site (http://portlandhouseforrent.com) where people can book online without me. Finally, I did my research up front and spent a ton of time on VRBO.com and was able to understand that I could break even at the lowest rent for a 2 bd, 1 bath on my 3bd 2.1 bath home as long as I rented for 50% of the time, my mistake was pricing it this way and being booked so far in advance.

In closing, while I believe the numbers for the Vacation/Furnished/Corporate rental are great and command much more than unfurnished, when you take into account the up front furnishing costs, you can chew up $500 a month of income for two years easy just to pay back the furnishing cost. As a result, I do not believe the net returns of furnished rentals offers a significant upside to a turnkey and certainly not to a reno. Another thing to consider is that the cash I spent up front on this property could have purchased a turnkey property outright generating twice the return based on Cap Rate.

All this being said, I am probably going to stay in this market because I believe I will never have to chase rent, and the tenants have all been great.

I would be happy to answer any other questions, feel free to send me an offline message.